Appeal Granted: Duty Demand Set Aside, Penalties Annulled; "Custom Pack" Not a New Product Under Heading 9018.00.

The final order, reflecting the majority opinion, set aside the demand for duty and allowed the appeal, granting consequential relief to the appellants. The penalties and confiscations imposed by the Commissioner were annulled, as it was determined that the "Custom Pack" did not constitute a new manufactured product, and the classification under heading 9018.00 was incorrect.

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Issues Involved:
1. Excisability of "Custom Pack".
2. Classification under Central Excise Tariff.
3. Limitation period for demand of duty.
4. Penalties imposed under Section 11AC of the Central Excise Act, 1944, and Rule 173Q of the Central Excise Rules, 1944.
5. Confiscation of goods, plant, machinery, building, and land.

Detailed Analysis:

1. Excisability of "Custom Pack":
The core issue was whether the "Custom Pack" assembled by the appellants constituted a "manufactured" product under the Central Excise Act, 1944. The appellants imported various components like plastic tubes, connectors, blood filters, etc., and assembled them into "Custom Packs" used in heart surgeries. The Commissioner held that this activity resulted in a new product with a distinct name, use, and character, thus making it excisable. Conversely, it was argued that the process was merely assembling parts without changing their identity, which should not be considered manufacturing.

2. Classification under Central Excise Tariff:
The Commissioner classified the "Custom Pack" under heading 9018.00 of the Central Excise Tariff, which pertains to medical instruments and appliances. The appellants contended that the "Custom Pack" was not an instrument or appliance but a collection of accessories for heart surgery, thus challenging the classification.

3. Limitation Period for Demand of Duty:
The appellants argued that the demand was time-barred, citing a bona fide belief based on legal advice that their activity did not amount to manufacture. The Commissioner rejected this, noting that the appellants had previously declared the product for exemption but failed to do so when it became dutiable, indicating suppression of facts.

4. Penalties Imposed:
The Commissioner imposed a penalty equal to the duty demanded under Section 11AC and additional penalties under Rule 173Q. The appellants challenged these penalties, arguing that there was no intent to evade duty as they believed their activity was not manufacturing.

5. Confiscation of Goods, Plant, Machinery, Building, and Land:
The Commissioner ordered the confiscation of the seized goods, plant, machinery, building, and land, with options to redeem them on payment of fines. The appellants contested this, arguing that the confiscation was unwarranted given the nature of their activity.

Judgments Delivered:

Member (J):
The Member (J) upheld the Commissioner's order, confirming the demand of duty and penalties, albeit with reductions. The process undertaken by the appellants was deemed to result in a new product, thus constituting manufacture. The extended period for demand was justified due to the appellants' failure to declare the product when it became dutiable. However, penalties and fines were reduced considering the circumstances.

Member (T):
The Member (T) dissented, arguing that the activity was essentially packing and did not amount to manufacture. The "Custom Pack" was a collection of pre-existing items arranged for a specific use, not a new product. The classification under heading 9018.00 was incorrect as the pack was not an instrument or appliance. The demand and penalties were thus unwarranted.

Vice-President:
The Vice-President concurred with the Member (T), emphasizing that no new product emerged from the assembly process. The "Custom Pack" remained a collection of accessories, and the activity did not constitute manufacture. The classification under heading 9018.00 was also incorrect.

Final Order:
In view of the majority opinion, the demand of duty was set aside, and the appeal was allowed with consequential relief to the appellants. The penalties and confiscations ordered by the Commissioner were annulled.

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